Supreme Court Hears the Home Concrete Arguments Today

For those who have been following the Intermountain cases, i.e., the series of Tax Court and Courts of Appeals cases dealing with the interpretation of the six-year statute of limitation for under reported income (trying not to blatantly pick a side with that language), the Supreme Court will hear oral arguments in Home Concrete today.

For great coverage of the issues and the arguments that may be presented today visit Tax Appellate Blog.

D.C. Circuit: Six Year Statute of Limitations Applies to Overstatements of Basis

The Court of Appeals for the District of Columbia Circuit reversed the Tax Court on the question of whether or not the six year statute of limitations under sections 6229(c)(2) and 6501(e)(1)(A) applied to an overstatement of basis. The Court of Appeals followed the rationale of other recent government victories on this issue, see Grapevine (Fed. Cir.) and Beard (7th Cir.). The Court of Appeals also adopted the government’s argument that Chevron deference apply to the government’s regulation (adopted after litigation began) interpreting the application of the six year statute.

Read the opinion here.
Intermountain Insurance Service of Vail, LLC v. Commissioner, Docket No. 10-1204 (D.C. Cir. June 21, 2011)

For more about this opinion visit Tax Appellate Blog and Tax Prof Blog.

DOJ Advises Restraint on Some Chevron Deference Arguments

Tax Analysts reports that the Department of Justice will no longer argue that Chevron deference should apply to revenue rulings and revenue procedures.   The report cites Gilbert Rothenberg, appellate section chief, Tax Division, Department of Justice, who made the announcement during his comments at the American Bar Association’s recent Section of Taxation meeting in Washington, D.C.  Following the U.S. Supreme Court’s decision in Mayo Foundation v. U.S., the standard for the deference given to Treasury Regulations is now governed by Chevron v. U.S.

Mr. Rothenberg did note, however, that the DOJ will continue to assert Chevron deference for temporary regulations. This is important for followers of the Intermountain issue, i.e., whether retroactive temporary regulations apply to taxpayers accused of participating in listed transactions. The interpretation and application of those temporary regulations (Treas. Regs. 301.6229(c)(2)-1T and 301.6501(e)-1T) has created a split in the Circuits and since the release of Mayo Foundation, the Department of Justice has argued that Chevron deference should apply in these cases.  It seems they will continue to do so.

Hat Tip (Tax Prof Blog and Daniel J. White, Esq.)

Tax Court: 6 Year Statute of Limitations Still Does Not Apply to Understated Basis Cases

The U.S. Tax Court in a reviewed opinion, accompanied by two concurrences, rejects the applicability of final Treas. Reg. Sec. 301.6229(c)(2)-1(b) and follows its opinions in Intermountain Insurance Service of Vail v. Commissioner and Bakersfield Energy Partners, LP v. Commissioner to hold that the 6 year statute of limitations does not apply to an understatement of income. The majority opinion, sua sponte, considered the final regulations in light of the U.S. Supreme Court’s opinion in Mayo Foundation v. United States.

Read the Tax Court’s opinion here:
Carpenter Family Investments, LLC v. Commissioner, 136 T.C. No. 17 (2011)

Federal Circuit: 6 Year Statute of Limitations Applies to Overstatements of Basis

The Federal Circuit relies upon Mayo Foundation to find for the government on the 6 year statute of limitations issue in Grapevine v. United States, Docket 08-5090 (Fed. Cir., March 11, 2011). The Grapevine rationale differs from that put forth by the same court in Salman Ranch Ltd. v. United States, No. 2008-5053 (Fed. Cir. July 30, 2009), (when it found for the taxpayer) and by the other circuits who have considered the same issue.

For commentary on this opinion visit Tax Appellate Blog.

Read the opinion here:
Grapevine v. United States, Docket 08-5090 (Fed. Cir., March 11, 2011)

What does Mayo Foundation mean for Tax Litigation?

The Supreme Court’s decision in Mayo Foundation will have a lasting impact. Chevron deference is now the standard. One scholar asks whether that is always the case.

What to do about regulations that appear to be promulgated in order to affect the outcome of a pending case? Does Chevron deference still apply? Does another standard apply? Should another standard apply?

Prof. Lederman of the Univeristy of Indiana at Bloomington will present “Hold the Mayo: What Respect Should Courts Accord Tax Regulations and Rulings Issued During Litigation?” at the University of Florida Faculty Colloquia Series.

Please visit Tax Prof Blog for an abstract.

U.S. Supreme Court: Medical Residents are Employees Subject to FICA Withholding

A unanimous United States Supreme Court (8-0) rules that medical residents are employees, not students, and therefore are subject to FICA withholding. Chevron deference applies to Treasury Regulations rather than the standard set forth in National Muffler.

Mayo Foundation v. United States, No. 09-837 (January 11, 2011)